LCLS Project Management Document # 1.1-015 Project Management Revision 3.0 Earned Value Management System Description Patricia Mast (LCLS Project Controls Manager) Signature Date Mark Reichanadter (LCLS Deputy Project Director) Signature Date John Galayda (LCLS Project Director) Signature Date Change History Log Rev Revision Sections Description of Change Number Date Affected 0.0 01/18/2006 All Initial version released. 1.0 03/09/2006 All Complete rewrite and reformat 2.0 10/03/2007 1.3.8, App. B MR, Contingency definition update 3.0 11/13/2007 All Changed text to make the System Description for all SLAC projects, not just LCLS.
Stanford Linear Accelerator Center (SLAC Earned Value Management System Description
Table of Contents Table of Contents INTRODUCTION... V PROJECT ORGANIZATION AND PRELIMINARY PLANNING...1 1.1 PROJECT STRUCTURE...1 1.1.1 Objective [Guide 1, 2, 3 {2.1a, b, c}]...1 1.1.2 Project Execution Plan [Guide 3 {2.1c}]...1 1.1.3 Work Breakdown Structure [Guide 1 {2.1a}]...1 1.1.4 Work Breakdown Structure Dictionary [Guide 1 {2.1a}]...2 1.1.5 Organizational Breakdown Structure [Guide 2 {2.1b}]...2 1.1.6 Responsibility Assignment Matrix [Guide 3, 5 {2.1c, e}]...2 1.2 PROJECT SCHEDULE...2 1.2.1 Objective [Guide 6, 7 {2.2a, b}]...2 1.2.2 Schedule Development [Guide 6, 7 {2.2a, b}]...3 1.3 PLANNING AND BUDGETING...4 1.3.1 Objective [Guide 8, 9, 15 {2.2c, d, j}]...4 1.3.2 Performance Measurement Baseline [Guide 8, 9, 15{2.2c, d, j}]...4 1.3.3 Control Accounts [Guide 3, 5, 18 {2.1c, e, 2.3c}]...5 1.3.4 Control Account Planning [Guide: 3, 5, 8, 9, 10, 11, 30 {2.1c, e, 2.2c, d, e, f, 2.5c}]...5 1.3.5 Work Packages [Guide 3, 7, 9, 10, 11, 12 {2.1c, 2.2b, d, e, f, g}]...6 1.3.6 Planning Packages [Guide 3, 7, 9, 10, 11 {2.1c, 2.2b, d, e, f}]...7 1.3.7 Acquisition Planning [Guide 2, 9, 10, {2.1b, 2.2d, e}]...7 1.3.8 Management Reserve/Contingency and Undistributed Budget [Guide14 {2.2i}]...7 1.4 WORK AUTHORIZATION...8 1.4.1 Objective [Guide 3 {2.1c}]...8 1.4.2 Contractual Authorization [Guide 3 {2.1c}]...8 1.4.3 Work Authorization Document [Guide 3 {2.1c}]...8 EARNED VALUE ANALYSIS AND PROGRESS REPORTING...11 2.1 EARNED VALUE...11 2.1.1 Requirements for Employing Earned Value Methodology [Guide 7, 12 {2.2b, g}]...11 2.1.2 EV Measurement Techniques [Guide 7, 12 {2.2b, g}]...11 2.1.2.1 Discrete Effort... 12 2.1.2.2 Level of Effort (LOE)... 12 2.2 STATUS AND EARNED VALUE CALCULATION...12 2.2.1 Objective...12 2.2.2 Performance Measurement Data [Guide 22, 23 {2.4a, b}]...12 2.2.3 Evaluation of Planned Value [Guide 7, 12, 22, 23 {2.2b,g, 2.4a,b}]...14 2.2.4 Current Schedule Progress Evaluation [Guide 22, 23 {2.4a, b}]...14 2.3 PERFORMANCE ANALYSIS...15 2.3.1 Objective...15 2.3.2 Variance Analysis [Guide 22, 23, 25 {2.4a, b, d}]...16 2.3.3 Variance Thresholds [Guide 22, 23, 25 {2.4a, b, d}]...16 2.3.4 Performance Indices [Guide 22, 23, 25 {2.4a, b, d}]...16 2.3.5 Control Account Performance Analysis [Guide 22, 23, 25, 26, 27 {2.4a, b, d, e, f}]...17 2.3.6 Project Performance Analysis [Guide 22, 23, 25, 26, 27 {2.4a, b, d, e, f}]...17 2.3.7 Monthly Project Status Calculations and Forecasts [Guide 22, 23, 25, 27 {2.4a, b, d, f}]...18 2.4 REPORTING...18 2.4.1 Objective...18 i
LCLS Earned Value Management System Description 2.4.2 General Reporting [Guide 25, 26 {2.4d, e}]...18 2.4.3 Monthly Reporting Cycle [Guide 22, 23, 25 {2.4a, b, d}]...19 ACCOUNTING...21 3.1 ACCOUNTING PROCESSES...21 3.1.1 Objective...21 3.1.2 Cost Accounting Policy [Guide 16 {2.3a}]...21 3.1.3 Cost Code Structure [Guide 16, 17, 18, 19 {2.3a, b, c, d}]...21 3.1.4 Cost Accumulation [Guide 16 {2.3a}]...22 3.1.5 Direct Labor Cost [Guide 16 {2.3a}]...22 3.1.6 Material Cost and Accounting [Guide 16, 21 {2.3a, f}]...22 3.1.7 Subcontract Cost [Guide 16 {2.3a}]...22 3.1.8 Other Direct Cost (ODC) [Guide 16 {2.3a}]...23 3.1.9 Indirect Cost Accumulation [Guide 13, 19 {2.2h, 2.3d}]...23 3.1.10 Accounting Adjustments [Guide 19, 30 {2.3d, 2.5c}]...23 3.2 INDIRECT COST PLANNING AND CONTROL...23 3.2.1 Objective...23 3.2.2 Indirect Cost Pools [Guide 4, 13, 19, 24 {2.1d, 2.2h, 2.3d, 2.4c}]...23 3.2.3 Allocation of Indirect Costs to Projects [Guide 4, 13, 19, 24 {2.1d, 2.2h, 2.3d, 2.4c}]...23 3.2.4 Revisions to Indirect Rates [Guide 4, 13, 19, 24 {2.1d, 2.2h, 2.3d, 2.4c}]...23 3.3 MATERIAL ACCOUNTING [GUIDE 20, 21 {2.3 E, F}]...24 SUBCONTRACT MANAGEMENT...25 4.1 SUBCONTRACTS WITH EV FLOW-DOWN [GUIDE 9, 10,16,22,23 {2.2D, E, 2.3A, 2.4A, B}]...25 4.2 SUBCONTRACTS WITHOUT EV FLOW-DOWN [GUIDE 9, 10,16,22,23 {2.2D, E, 2.3A, 2.4A, B}] 25 CHANGE CONTROL...27 5.1 CHANGE-CONTROL PROCESS...27 5.1.1 Objective [Guide 28, 29, 31, 32 {2.5a, b, d, e}]...27 5.1.2 Change Documentation [Guide 28, 29, 31, 32 {2.5a, b, d, e}]...27 5.1.3 Change Request [Guide 28, 29, 31, 32 {2.5a, b, d, e}]...27 5.1.4 External and Directed Changes [Guide 28, 29, 31, 32 {2.5a, b, d, e}]...28 5.1.5 Internal Changes [Guide 28, 29, 31, {2.5a, b, d}]...28 5.1.5.1 Internal Replanning Restrictions [Guide 28, 29, 30, 31 {2.5a, b, c, d}]... 28 5.1.5.2 Changes within Control Accounts [Guide 28, 29 {2.5a, b}]... 29 5.1.5.3 Other Internal Replanning [Guide 28, 29, 31 {2.5a, b, d}]... 29 5.1.5.4 Changes to Actual Direct and Indirect Costs [Guide 29, 30 {2.5b, c}]... 30 5.1.5.5 Changes to Budgeted Direct and Indirect Rates [Guide 29 {2.5b}]... 30 5.1.5.6 Changes in Scope or Nature of Work [Guide 28, 29, 31 {2.5a, b, d}]... 30 5.1.5.7 Changes in Make-or-Buy Determination [Guide 28, 29, 31 {2.5a, b, d}]... 30 5.1.5.8 Changes in Funding Profiles [Guide 28, 29, 31 {2.5a, b, d}]... 31 5.2 SCHEDULING CHANGES [GUIDE 28, 29, 31 {2.5A, B, D}]...31 SURVEILLANCE AND MAINTENANCE...33 6.1 SURVEILLANCE AND MAINTENANCE PROCESSES...33 6.1.1 Objectives...33 6.1.2 System Surveillance...33 6.1.3 System Maintenance...33 6.2 SELF ASSESSMENT FOR SYSTEM SURVEILLANCE AND MAINTENANCE...34 APPENDIX A ANSI/EIA-748-A GUIDELINE CROSSWALK...35 APPENDIX B ABBREVIATIONS, ACRONYMS, AND GLOSSARY OF TERMS...41 ii
Table of Contents APPENDIX C ROLES AND RESPONSIBILITIES...51 APPDENDIX D REFERENCES...55 FIGURES Figure 1-1. DOE Acquisition Management System...5 Figure 2-1. Earned Value Data Elements...17 iii
LCLS Earned Value Management System Description iv
Introduction Introduction The Stanford Linear Accelerator Center (SLAC) uses an Earned Value Management System (EVMS) to integrate project management elements required to effectively organize, plan, and control complex projects. This Earned Value Management System (EVMS) Description document provides a comprehensive exposition of processes and guidance for cost, schedule, and technical performance management and reporting as well as for effective project execution using earned value management. SLAC project activities are primarily conducted to support the mission needs and national security requirements of the U.S. DOE, Office of Science (SC). In support of DOE projects, SLAC follows the requirements in DOE Order 413.3, Program and Project Management for the Acquisition of Capital Assets, and generally follows the accompanying guidance in manual (DOE M 413.3), which delineates earned value requirements. The SLAC EVMS also fulfills the requirements of the Office of Management and Budget Circular No. A 11, Part 7, Section 300, Planning, Budgeting, Acquisition, and Management of Capital Assets which also delineates earned value requirements. The SLAC EVMS process and organization are designed to comply with the American National Standards Institute (ANSI) and Electronic Industries Alliance (EIA) Standard for Earned Value Management Systems (ANSI/EIA-748-A, January, 2006). The ANSI/EIA-748-A standard is an industry best practice as well as the official DOE and federal government standard for EVMS. Appendix A provides a crosswalk between the 32 ANSI/EIA-748-A guidelines and the SLAC EVMS. The SLAC EVMS is a key component of the organization, methods, and procedures adopted by the SLAC projects to ensure that their missions and functions are properly executed. It addresses the seven principles of EVMS as defined by the ANSI standard: Plan all work scope for the project to completion. Break down the project work scope into finite pieces that can be assigned to a responsible person or organization for control of the technical, schedule, and cost objectives. Integrate the project work scope, schedule, and cost objectives into a performance measurement baseline against which accomplishments may be measured. Control changes to the baseline. Use actual costs incurred and recorded in accomplishing the work performed. Objectively assess accomplishments at the work performance level. Analyze significant variances from the plans, forecast impacts, and prepare an estimate at completion based on performance to date and work to be performed. Use EVMS information in management processes. These principles are integrated into a comprehensive system that develops and maintains the baseline; tracks project cost, schedule, and scope; and provides for the generation of timely performance measurement data and reports. Performance measurement reports provide management with objective v
LCLS Earned Value Management System Description project information critical to monitoring progress, identifying significant issues, and implementing corrective actions as needed. The SLAC EVMS is designed to provide project managers with a tool to promote optimal planning, accurate reporting, and effective control through the standardization of processes used in project scope, schedule, and budget management. This document is organized into six (6) sections and four (4) appendices. The details of the EVMS, as it relates to the 32 ANSI/EIA-748-A guidelines, are discussed in these core chapters. The Appendices include: A ANSI/EIA-748-A Guideline Crosswalk; B Abbreviations, Acronyms, and Glossary of Terms; C Roles and Responsibilities of the SLAC project team members; D References. Whereas the SLAC EVMS is considered applicable for use on all SLAC projects, this document has been tailored for the LCLS Project. Therefore configuration management of this EVMS document is the responsibility of the LCLS Project Control Manager and is maintained through the use of project configuration control. Proposed revisions to the LCLS EVMS description are submitted to the LCLS Project Management Office to ensure the proper coordination, review, and incorporation of appropriate changes. Worth noting here is LCLS s use of the term management reserve/contingency throughout this document. The Office of Engineering and Construction Management s (OECM) lexicon calls this management reserve. SLAC uses the term contingency to describe the management reserve for total estimated cost (TEC) and the term management reserve to describe the management reserve for other project costs (OPC). Throughout this document, cross references are made to the ANSI/EIA-748-A EVMS guidelines using a section number reference and a guideline number. The section references correspond to the content in Section 2 of the ANSI/EIA-748-A standard titled EVMS Guidelines. The guideline numbers correspond to the numbers assigned to the standard guidelines in the National Defense Industrial Association (NDIA) Program Management Systems Committee (PMSC) ANSI/EIA-748-A Standard for Earned Value Management Systems Intent Guide. For example, the NDIA Intent Guideline number 12 corresponds to the ANSI/EIA-748-A standard Section 2.2g. This will be referred to in this document as Guide 12 {2.2g}. vi
Project Organization and Preliminary Planning Section 1 Project Organization and Preliminary Planning 1.1 PROJECT STRUCTURE 1.1.1 Objective [Guide 1, 2, 3 {2.1a, b, c}] The projects has developed a Project Execution Plan (PEP) to organize and manage the project s scope of work. Key project organization components of the PEP associated with EVMS are the Work Breakdown Structure (WBS), the Organizational Breakdown Structure (OBS), and the Responsibility Assignment Matrix (RAM). 1.1.2 Project Execution Plan [Guide 3 {2.1c}] The Project Execution Plan (PEP) is the primary vehicle that correlates project objectives with a plan for accomplishment. It also serves as the agreement between DOE and the project director/deputy project director on how the project will proceed. Among the principle elements, a project execution plan describes the responsibilities of the project and DOE organizations involved in the project, defines roles and restates the mission need, provides a general overview of the project, and outlines cost and schedule data. The major elements required in a DOE project s Project Execution Plan are stated in DOE Order 413.3 and DOE Manual 413.3-1. The Project Execution Plan is developed by the Federal Project Director, with input from the project director/deputy project director. After obtaining concurrence from the Stanford Site Office (SSO), the PEP is formally approved by DOE headquarters. The Project Execution Plan is under configuration control. 1.1.3 Work Breakdown Structure [Guide 1 {2.1a}] The Work Breakdown Structure (WBS) is a product-oriented, hierarchical depiction of all work elements required to accomplish the entire work scope of the project. Each descending level is a subdivision of the work above, with increasingly detailed definition/division of the work. The WBS is the structure for integrating the scope, schedule, and budget for all project work. It is used as a framework for assigning and defining work, schedule development, estimating and budgeting, managing funds, and controlling changes. The WBS is used by management throughout the lifecycle of a project to identify, assign, and track the project s total work scope. Each element is assigned a 1
LCLS Earned Value Management System Description unique code to identify it in all project documents. The WBS is detailed in the PEP, or attached as an appendix. 1.1.4 Work Breakdown Structure Dictionary [Guide 1 {2.1a}] The project has developed a WBS dictionary. The WBS dictionary is a set of specific definitions that describe the scope of each work element identified in the WBS. It defines each element to at least the control account level in terms of the content of the work to be performed. 1.1.5 Organizational Breakdown Structure [Guide 2 {2.1b}] The Organizational Breakdown Structure (OBS) is a project organization framework for identification of accountability, responsibility, management, and approvals of all authorized work scope. It is a direct representation and description of the hierarchy and organizations that will provide resources to plan and perform work identified in the WBS. The OBS helps management focus on establishing the most efficient organization, by taking into consideration availability and capability of management and technical staff, including subcontractors, to achieve project objectives. The organizational breakdown structure for each project is found in the PEP. 1.1.6 Responsibility Assignment Matrix [Guide 3, 5 {2.1c, e}] The Responsibility Assignment Matrix (RAM) is an element of the project that integrates the organizational breakdown structure with the work breakdown structure. This integration identifies key control points at the intersections of the WBS and OBS. Control accounts are then created at these key control points and they facilitate the linkage between the planning, scheduling, budgeting, work authorization, cost accumulation, and performance measurement processes. The control accounts are determined by the scope of the management tasks. A single control account manager (CAM) is assigned to one or more these control accounts and is responsible for the planning and control within their control account(s) and the identification, analysis, and reporting of significant variances that may occur during project execution. Using the RAM and OBS, the project is able to identify the person/organization responsible and accountable for every element of the WBS and Statement of Work (SOW). 1.2 PROJECT SCHEDULE 1.2.1 Objective [Guide 6, 7 {2.2a, b}] The project schedule is used to plan and control the interdependencies of all the activities needed to execute the project. The project employs a scheduling tool that maintains the target schedule, supporting control milestones in the baseline, and the current schedule used to accumulate and report current schedule status. 2
Project Organization and Preliminary Planning 1.2.2 Schedule Development [Guide 6, 7 {2.2a, b}] The development of the project schedule is the responsibility of the entire project team and may involve multiple iterations in order to reach a workable plan for accomplishing the work scope. Technical leads from the various disciplines participate in these early iterations to identify the constraints and interfaces. The control account managers expand these schedules into the detail needed to identify the activities that will be performed in executing their assigned control account responsibilities. Project schedule details may evolve over time in a rolling wave. At the project outset, the details of the future schedule are generalized and the associated activities are of longer durations, but in sufficient enough detail to allow the definition of the project critical path. As the project moves through time and as activities are more clearly defined, new activities with shorter durations are added. The scheduling system consists of baseline, current, and supplemental schedules. BASELINE The baseline schedule contains the list of control milestones that are generally negotiated with the DOE and are identified in the Project Execution Plan. The project director/deputy project director has supplemented these milestones with other events in a hierarchical structure deemed sufficiently important to be in the baseline. The logic and activity relationships are established in the baseline schedule such that they support the timely accomplishment of the control milestones. The baseline schedule is assembled by the project management team. The project director/deputy project director has the responsibility to ensure that all parts of the baseline schedule properly mesh and phase with each other. The baseline schedule should be consistent with constraints imposed externally, internally, by resource limitations or in the context of other projects at SLAC. The baseline schedule is approved and fixed consistent with DOE Order 413.3. The baseline schedule constitutes the official plan against which schedule performance is measured and reported to DOE, SLAC management, and project management. The baseline schedule is maintained under configuration management and may not be revised without proper authorization as detailed in the Baseline Change Control Thresholds table documented in the PEP. CURRENT The current schedule is used to manage all project activities and is developed by logically networking the project activities. The schedule is an integrated, network-logic-based schedule. This network approach provides the ability to relate the project s time-phased activities in their logical sequence using predecessor-successor relationships and timing. The current schedule also enables the determination of the critical path and an evaluation of the effects of the current schedule performance status on activities and milestones scheduled to be accomplished in the future. The current schedule includes detailed input from all control account managers, and provides the ability to relate activities and milestones between different levels of schedules. The current schedule includes all project milestones identified in the baseline schedule. 3
LCLS Earned Value Management System Description The current schedule employs the approved baseline schedule to relate progress. The current schedule shows the actual status of the project or program at the current point in time by reflecting the work performed and the milestones accomplished. It is used by the project management team for analysis, including issue identification and resolution. SUPPLEMENTAL The project team may employ supplemental schedules that are not part of the baseline schedule hierarchy. They are often used for day-to-day operational planning and management, and as the name suggests, supplement the baseline and current schedules, but are not under configuration control. 1.3 PLANNING AND BUDGETING 1.3.1 Objective [Guide 8, 9, 15 {2.2c, d, j}] Planning and budgeting establish the time-phased budget used to measure project performance. 1.3.2 Performance Measurement Baseline [Guide 8, 9, 15{2.2c, d, j}] The performance measurement baseline (PMB) is the time-phased budget plan used to measure project performance. In earned value management, the assignment or allocation of budgets to scheduled segments of work produces a plan against which actual performance is compared. The performance measurement baseline is finalized with Critical Decision-2 (CD2), Approve Performance Baseline. Figure 1-1 presents the DOE acquisition management development cycle. The relationship of individual work tasks to the time-phased resources necessary to accomplish them is established at the control account level. As practical and meaningful, all control accounts and related work packages should be planned, at least at a summary level, to the end of the project. It is anticipated that planning packages will be used in areas of the project where necessary. Any control accounts that cannot be established in the initial planning effort should identify the approach by which planning packages are detailed into work packages. The performance measurement baseline is the summation of the time-phased budgets for all of the control accounts and summary-level planning packages, plus applicable indirect budgets and any undistributed budget. The performance measurement baseline is a representation of current program plans. Proper maintenance of the baseline will prevent performance measurement against an outdated or unauthorized plan. 4
Project Organization and Preliminary Planning Figure 1-1. DOE Acquisition Management System 1.3.3 Control Accounts [Guide 3, 5, 18 {2.1c, e, 2.3c}] A control account is a management control point at which budgets (resource plans) and actual costs are accumulated and compared to earned value for management control purposes. A control account is a natural management point for planning and control since it represents the work assigned to one responsible organizational element for one WBS element. Within the financial accounting system, cost collection is performed at the control account level. Control accounts roll up into summary level accounts, which in turn roll up to an overall project summary account. No charges are directly charged or recorded at any summary level account. Accounts are called project IDs in the SLAC accounting system and are commonly referred to as charge numbers. Multiple charge numbers, representing individual work packages, may feed into a summary charge number, which is the control account. While multiple charge numbers may roll up into a summary control account charge number, a charge number is never divided among multiple control accounts. In all cases, the control account has a unique charge numbers that matches its WBS activity identifier. 1.3.4 Control Account Planning [Guide: 3, 5, 8, 9, 10, 11, 30 {2.1c, e, 2.2c, d, e, f, 2.5c}] Control account planning consists of those efforts needed to establish time-phased budgets for each control account identified for project execution. The control account managers have the primary responsibility for developing and managing the control account budgets. The project provides control 5
LCLS Earned Value Management System Description account managers with budget guidance and a common planning capability to perform resource costing, indirect rate applications, and other calculations. Control accounts are generally budgeted in dollars. The Project Director and the control account manager come to agreement on the work scope to be accomplished, and the accompanying budget and schedule necessary to support the required effort. Once these budgets have been developed, the amount of budget associated with each monthly accounting period is referred to as the Planned Value (PV) or the Budgeted Cost of Work Scheduled (BCWS). The total budget with respect to any given grouping of work is called Budget at Completion (BAC). Although records can be kept at lower levels of detail, the lowest required level of detail for maintaining the PV and the BAC is by resource within the planning package, or work package subsets, of the control account. Control account budgets may be further subdivided into one or more work packages and planning packages in the project schedule. The control account manager selects the earned value measurement technique the method for measuring the work performed. Only a single technique may be used on an individual work package. Planning packages have no associated earned value technique, as they always represent future work that requires detailed planning and estimation. Control account budgets in the EVMS are governed by the following guidelines: The sum of budgets for work packages and planning packages equals the control account BAC value. The control account manager must be able to provide the basis for the budgets of all planned work packages and planning packages. The start and completion dates for all tasks, including planning packages, fall within the scheduled start and completion dates of the control account. Retroactive changes to budgets for completed efforts are prohibited except for the explicit correction of errors. Replanning future portions of open and unopened work packages and planning packages requires formal change approval, consistent with the PEP change management requirements. 1.3.5 Work Packages [Guide 3, 7, 9, 10, 11, 12 {2.1c, 2.2b, d, e, f, g}] Work packages are a subdivision of a control account and consist of a discrete or level of effort task that has been planned and budgeted in detail. The budget for each is segregated into elements of cost. Work packages constitute the basic building blocks used in planning, measuring accomplishment, and controlling project work. A work package has the following characteristics: Represents units of work at levels where work is performed. Is clearly distinguishable from all other work packages by a descriptive title. Is assignable to a single organizational element responsible for performing the work. Has scheduled start and completion dates and, as applicable, interim milestones all of which represent physical accomplishment. 6
Project Organization and Preliminary Planning Has a budget or an assigned value expressed in terms of dollars. Indirect costs are allocated based on the applicable base per the applicable financial practices disclosures. Uses a single earned value method. Has a limited duration within a reasonably short time span. Can be integrated with project schedules. Reflects the way in which work is planned and has meaningful products, or is a management-oriented subdivision of a higher-level element of work. Uses objective indicators/milestones as much as possible to minimize in-process work evaluation and to provide an accurate assessment of progress. Contains time-phased budgets that are used for planning, reporting, and control. When learning curves are used, time-phased budgets and schedules reflect this learning. Level of effort should only be used on a work package where no definable deliverable or work products exist as a consequence of the work package. 1.3.6 Planning Packages [Guide 3, 7, 9, 10, 11 {2.1c, 2.2b, d, e, f}] Planning packages are created to describe work within a control account that will occur in the future. Planning packages must have a work scope, schedule, and time-phased budget. Planning packages are normally larger (scope, schedule, and budget) than individual detailed work packages, but planning packages must still relate to a specific work scope. Individual planning packages do not require the detail found in work packages. When planning packages are converted into work packages, they are defined in greater detail. 1.3.7 Acquisition Planning [Guide 2, 9, 10, {2.1b, 2.2d, e}] The project often subcontracts with external suppliers, contractors, and collaborators for much of the work associated with the project. Examples include architecture/engineering (A/E) firms, general and specialty contractors, other national laboratories, research institutions, and consultants. Typically, these subcontracts are executed through Firm-Fixed Price (FFP), Time and Material, or Level of Effort (LOE) support type contracts. The contracting vehicle type is determined based on the nature of the work to be subcontracted as well as its complexity, risk, and cost. All acquisitions are made in accordance with the requirements of the project s prime contract with DOE and, where applicable, SLAC policies, and California state law. Uniform policies and procedures for Federal and University project acquisitions provide for a fair and competitive environment. 1.3.8 Management Reserve/Contingency and Undistributed Budget [Guide14 {2.2i}] The management reserve/contingency is an amount of the approved Project Budget Base that the project director/deputy project director sets aside at the start of the project. This allocation is referred to as Contingency for the portion allocated to the Total Estimated Costs (TEC) and as Management Reserve for the portion allocated to the Other Project Costs (OPC). The management reserve/contingency is established to provide budget coverage for future uncertainties (risks) that are 7
LCLS Earned Value Management System Description within the scope of the project but are not funded in the control account budgets. The management reserve/contingency is not assigned to specific segments of work. The project change control procedure provides the process for control of management reserve/contingency. The project director/deputy project director establishes the management reserve/contingency based on a risk analysis of the project work scope. The factors affecting the amount of management reserve/contingency established are: technical risk, schedule issues, and/or possible shortages in a critical resource area (i.e., labor, material, timely appropriations, or support services), direct and indirect rate changes, etc. As the level of risk is reassessed on the project, the budget for management reserve/contingency can change. Management reserve/contingency is released to provide a budget for risk mitigation within the project work scope. Conversely, budget from the control accounts is returned to the management reserve/contingency whenever the work scope, and therefore the allocated budget, is decreased. Management reserve/contingency transactions are documented in the project baseline change control log. These transactions are identified in the EVMS reports to DOE. At the present time, the project does not employ undistributed budget as described in the NDIA Intent Guide. 1.4 WORK AUTHORIZATION 1.4.1 Objective [Guide 3 {2.1c}] Work authorization ensures that all work performed on the project has been contractually authorized and properly planned prior to its execution. 1.4.2 Contractual Authorization [Guide 3 {2.1c}] A work authorization cannot be officially initiated until the formal work authorization and funding is received from DOE. The project director/ deputy project director will request and the SLAC Office of the CFO will authorize the allocation of a block of project IDs (generally known as charge numbers) in the SLAC accounting system. The opening of these blocks of charge numbers officially initiates the project and allows project setup to begin. 1.4.3 Work Authorization Document [Guide 3 {2.1c}] With the completion of the control account planning process for each control account, the total authorized work is released to the responsible organizations based on the approved control accounts. The project director delegates work down to the control account managers within the authority provided in the work authorization statement. The work authorization provided in each control account includes the relationship to the WBS element or elements, responsible organization 8
Project Organization and Preliminary Planning identification, control account task description, schedule, and time-phased budget in dollars. The approved control account can only be changed with appropriate change approval. The approved control account is the project director s vehicle to delegate responsibility for budget, schedule, and scope requirements to the control account manager. The signing of a work authorization document by all parties represents a multilateral commitment to authorize and manage the work within the budget and agreed-upon schedule. 9
LCLS Earned Value Management System Description 10
Earned Value Analysis and Progress Reporting Section 2 Earned Value Analysis and Progress Reporting 2.1 EARNED VALUE The comparison of actual costs and the work accomplished with baseline plans generated during the planning and budgeting phase is included in internal and external reports. Forecasts of future costs and schedule dates are made, and corrective actions are initiated when problems are identified. 2.1.1 Requirements for Employing Earned Value Methodology [Guide 7, 12 {2.2b, g}] Work packages are established and opened when the Planned Value (PV), or Budgeted Cost of Work Scheduled (BCWS), is planned. Each work package uses one earned value methodology to track work progress. Discrete work packages (i.e., tangible/measurable work) use a Percent Complete of Weighted Milestone technique. Non-discrete work packages, such as for project management and general support work that cannot be readily measured is tracked using the Level of Effort (LOE) technique. Other earned value techniques are available for use if requested. The earned value technique is selected consistent with the following: Stability One earned value technique is chosen for each work package. The selected technique and milestone(s) will not be changed after the work package is opened. Objectivity Completion of an event (for discrete work) is based upon predetermined criteria or tangible product. Ability to audit The procedure and criteria for evaluation will facilitate audit of the Earned Value (EV), or Budgeted Cost of Work Performed (BCWP) reported. 2.1.2 EV Measurement Techniques [Guide 7, 12 {2.2b, g}] (Excerpted from the Project Management Institute Practice Standard for Earned Value Management, 2005.) Earned Value is a measure of work performed. Techniques for measuring work performed are selected during project planning and are the basis for performance measurement during project execution and control. Earned value techniques are selected based on key attributes of the work, primarily the duration of the effort and the tangibility of its product. 11
LCLS Earned Value Management System Description The performance of work that results in distinct, tangible products can be measured directly. This work is called discrete effort. Other work is measured indirectly as a function of either discrete efforts or elapsed time. Work that is.based on elapsed time is referred to as level of effort. 2.1.2.1 Discrete Effort Work performance is measured monthly. The EV technique selected for measuring the performance of discrete effort is the Percent Complete of Weighted Milestone method. The percent complete of weighted milestone technique is applied to the discrete tasks in the project schedule. At each measurement period, the responsible worker or manager makes an assessment of the percentage of work complete on that task. If there are objective indicators that can be used to arrive at the percent complete (for example, number of units of product completed divided by the total number of units to be completed), then they should be used. 2.1.2.2 Level of Effort (LOE) Some project activities do not produce tangible outcomes that can be measured objectively. Examples include project management, operating a project technical library, and the like. These activities consume project resources and should be included in EVMS planning and measurement. In these cases, the level of effort (LOE) technique is used for determining earned value. A planned value is assigned to each LOE task for each measurement period. This planned value is automatically credited as the earned value at the end of the measurement period. LOE activities will never show a schedule variance. Consequently, the technique always biases the project data toward an on-schedule condition. LOE should be used conservatively and should be considered only when the task does not lend itself to a more objective measurement technique. 2.2 STATUS AND EARNED VALUE CALCULATION 2.2.1 Objective The objective of measuring schedule progress and calculating earned value is to accumulate and report the EVMS data needed to assess the project s performance for the current period and the cumulative-to-date costs based on the amount of work performed. 2.2.2 Performance Measurement Data [Guide 22, 23 {2.4a, b}] The cost/schedule performance measurement data provides visibility concerning the project cost/schedule status as it relates to completed work and forecasted work remaining. These data elements are accumulated monthly for each control account and are summarized directly through the various elements of the WBS to obtain the cost/schedule status at any level of the structure. The primary data elements that are used to supply this information are: 12
Earned Value Analysis and Progress Reporting Planned Value (PV) or Budgeted Cost of Work Scheduled (BCWS). This is the time-phased budget plan approved as a result of the control account process. The PV or BCWS may be developed at a lower level of detail. The lowest level should be at least the work package or planning package level of detail within each control account. Earned Value (EV). A measurement of the work completed. The EV is also referred to as the Budgeted Cost of Work Performed (BCWP), and is derived by applying predetermined earned value calculations to assess the work completed for each in-process work package. Schedule Variance (SV). When the BCWS is subtracted from the BCWP, a measure of the SV is obtained (BCWP BCWS = SV). Care must be exercised in drawing inferences from either favorable or unfavorable SVs because of the influence of high-value work performed out of sequence. Crosschecks must be made using the scheduling system to determine the true status of the schedule. Actual Cost of Work Performed (ACWP). The ACWP is the cost for work that has been completed or partially completed (actual cost plus accruals). The ACWP is compiled in the applicable financial management systems by control account. Accruals are routinely added through the applicable accounting system when the control account manager determines some accomplished work is not shown as paid in the month earned, has consulted with affected parties (usually subcontractors/vendors), and communicated with Accounts Payable. If errors are discovered later, necessary corrections are made into the earned value processor. Cost Variance (CV). When the ACWP is subtracted from the BCWP, a measure of the CV is obtained (BCWP ACWP = CV). A positive CV indicates that work is being performed for fewer dollars than planned, whereas a negative variance indicates that work is being performed for more dollars than planned. Budget at Completion (BAC). The BAC is the total budget for a given work scope. The BAC for the total project plus management reserve/contingency equals the total project cost (TPC). The BAC for lower-level WBS elements, control accounts, and work packages equals the cumulative BCWS up to and including the last period to which it is assigned. Estimate to Complete (ETC). The ETC is the latest revised estimate for the remaining work scope. Estimate at Completion (EAC). Management s latest revised cost estimate for a given work scope (refer to Section 2.3.7). Variance at Completion (VAC). When the EAC is subtracted from the BAC, a measure of the VAC is obtained (BAC EAC = VAC). The VAC is the amount of underrun or overrun forecast for the work scope being considered, without regard to the use of management reserve/contingency. When appropriate, management judgment will supplement or supplant the ETC and EAC calculated values. 13
LCLS Earned Value Management System Description 2.2.3 Evaluation of Planned Value [Guide 7, 12, 22, 23 {2.2b,g, 2.4a,b}] The time-phased budget Planned Value (PV) represents the plan against which performance is measured. PV is also called the Budgeted Cost of Work Scheduled (BCWS). At the control account level, the baseline is the result of assigning the necessary resources to the scheduled tasks (work packages and planning packages) as part of the process of detail planning for the control account. The process includes identifying the tasks, scheduling the tasks, identifying the resources, and determining the earned value method. Work to be accomplished in a control account must be performed in a logical, consistent manner to help provide consistency in determining the baseline and accomplishing the work. To avoid unrealistic variances, the BCWS is established according to the control account manager s decision on how the work is to be accomplished, and the earned value method is chosen to ensure that EV is claimed in the same manner as the BCWS was planned. Accuracy of determining actual performance is directly related to the ability to unambiguously determine progress and earned value within a given work package or control account. Consequently, level of effort (LOE) tasks should only be used in those work packages where no deliverables or other material means of determining actual progress exists. The earned value of LOE only documents the passage of time and not actual project progress. Consequently, within a discrete control account, the inclusion of the LOE activity should be avoided and is kept to a minimum in order to prevent any distortion of the performance measurement data. When unavoidable, and LOE work is combined with discrete work within the same control account, then segregated work packages are established for the discrete and LOE portions, as appropriate. 2.2.4 Current Schedule Progress Evaluation [Guide 22, 23 {2.4a, b}] The baseline schedule maintains original agreed-upon milestone dates, unless altered in accordance with the Change Control Procedure. Current status of the project is compared to the baseline for progress measurement and analysis. Progress and status are maintained on the current schedule, which also reflect the current forecast of activity durations, activity start and finish dates, and milestone dates. The current schedule represents the remaining work and will be archived periodically. The current schedules are used for internal project management and DOE reporting purposes. A comparison of the current and baseline schedules indicates the extent to which the project is ahead of or behind schedule. This comparison also identifies the specific activities and events that are the source of current SVs or impending problems. At the end of each accounting month, as a minimum, each control account manager will determine the status of each open activity in the current schedule for which they are responsible and update the current schedule accordingly. Various methods are used to assess the status for different kinds of activities to ensure that progress is being determined objectively. 14
Earned Value Analysis and Progress Reporting The status of material and equipment procurement activities is tracked through the procurement system. The procurement system tracks material purchases from receipt of a purchase request, to receipt of the material, until invoicing and payment are completed. Earned value flow-down subcontracts have provisions in their contracts that require the subcontractors to submit an earned value report at least monthly. Such subcontractors are required to provide quantitative data that can be used to assess the status of their work activities. Non-earned value flow-down subcontractors have provisions in their contracts that require them to develop a schedule that supports the details in the project. The control account managers are responsible for ensuring that the methods used to status these schedules result in an objective measurement of progress. The status for current schedules is developed to provide the following information: Progress to the DOE and to project management, focusing particularly on those areas of greatest impact on, or potential risk to, key milestones and project completion. Progress as compared against the baseline schedule. Basis for forecasts of future events, milestones, activities, and project completion. Status information, which is collected at the detail schedule level, includes the following information: Actual start dates for activities begun during the status period. Actual finish dates for activities completed during the status period. Actual occurrence dates for milestones accomplished during the status period. Percentage complete and/or remaining duration of activities started but not complete. Forecast completion dates for activities previously started but not yet completed. Forecast duration, start, and finish dates for activities and occurrence dates for milestones that are currently scheduled in the future and for which a change is foreseen. The control account manager updates the schedule to reflect the current status. Status from updated current control account schedules is reflected in the current project schedule. 2.3 PERFORMANCE ANALYSIS 2.3.1 Objective Analysis of performance measurement data will identify and document the cost, schedule, and work scope conditions that may require management attention, assess the impact of these conditions on the baseline and future work, and develop and implement corrective actions as necessary. This subsection establishes the minimum requirements and guidance for performance analysis for the project, specifically variance analysis, corrective action, and updating EACs. 15
LCLS Earned Value Management System Description 2.3.2 Variance Analysis [Guide 22, 23, 25 {2.4a, b, d}] Variance analyses provide the means for the control account manager to derive and communicate cost, schedule, and EAC divergences from the performance measurement baseline. Root-cause analysis is performed at least at the control account level. The control account structure is integral with the WBS and will accurately summarize budgets, earned value, actual costs and the associated variances up through both the WBS and the project organization. Variance analysis at levels above the control account is performed in support of internal management needs and DOE requirements. 2.3.3 Variance Thresholds [Guide 22, 23, 25 {2.4a, b, d}] Variance analysis is conducted if any cumulative SPI or CPI is less than 0.9 or greater than 1.10 at the WBS level 3. The project director/ deputy project director may establish lower thresholds to respond to project needs. 2.3.4 Performance Indices [Guide 22, 23, 25 {2.4a, b, d}] The control account manager(s) will apply various metrics to assess the performance of their assigned control accounts. These performance metrics will provide additional insight and a basis for the CV and SV analysis. All metrics will be updated at least monthly. The metrics employed should be both time-phased and snapshot in nature. Time-phased metrics include a Cost Performance Index (CPI=BCWP/ACWP) and a Schedule Performance Index (SPI=BCWP/BCWS). The control account manager will assess the time-phased metrics to look for control account performance trends. Snapshot metrics include CVs and SVs. Graphics are used to aid in displaying trends associated with project performance. Performance graphs are useful in communicating project performance objectives and in displaying progress toward meeting those objectives. Figure 2-1 shows an example of a commonly used graphic for a project that illustrates EVMS metrics. The orange, blue, and green trend lines are all expressed in project dollars. The middle (solid) line is the PV (BCWS), the planned work as defined in the current Earned Value Management Baseline. The top (dotted) line, the AC (ACWP), shows a higher than estimated project cost. The bottom (dashed) line, the EV (BCWP), or the actual work accomplished for the given time period. As illustrated on the graph, the SV is the difference between BCWP and BCWS; the CV is the difference between BCWP and ACWP. 16
Earned Value Analysis and Progress Reporting Figure 2-1. Earned Value Data Elements 2.3.5 Control Account Performance Analysis [Guide 22, 23, 25, 26, 27 {2.4a, b, d, e, f}] The control account managers prepare variance analysis statements or explanations for each control account exceeding established variance thresholds. The control account managers are responsible for determining the cause of the variance and its impact on the control account and the related activities and milestones, developing a corrective action plan (as appropriate), and including this information in the pertinent sections of the monthly report. Control account managers periodically (at least annually) develop a comprehensive EAC at the control account level using all available information to arrive at the best possible estimate. 2.3.6 Project Performance Analysis [Guide 22, 23, 25, 26, 27 {2.4a, b, d, e, f}] Project performance analysis is an ongoing process that includes routine and ad hoc analyses of problem causes, corrective actions, risk analysis, and cost savings opportunities. The process is formalized via the monthly report, which includes a review of cost and schedule performance information, identification of significant problem areas, and the status of corrective actions. 17